The number of Yorkshire firms facing financial distress has reached a record low, says a survey by insolvency trade body R3

A record low of just 18% of businesses in Yorkshire and the North East are showing signs of business distress, according to the latest Business Distress Index from R3, the insolvency trade body.

The latest figure compares with the UK tally of 33% - also a record-breaking low.

R3 has tracked five key indicators of business distress since March, 2012 – including decreasing profits, sales volumes, or market share, the regular use of maximum overdraft facilities and new redundancies. Each indicator measures the share of UK businesses experiencing that particular sign of distress.

In the latest survey, all indicators are at or near record lows. The share of businesses in the region experiencing at least one sign of distress is now less than a third of businesses in the same position when the survey first started in March, 2012, (63%).

Chris Wood, Yorkshire R3 vice-chairman and partner at Clough Corporate Solutions in Cleckheaton, said: “Business distress has tumbled over the past two years as businesses have got over the worst of the recession and it is encouraging to see that the level in Yorkshire and the North East is almost half of the relatively low national level. This has been matched by steadily falling corporate insolvency numbers.

“Historically, business failures increase as the economy bounces back: rapid economic growth can be a problem for a business that used up cash reserves in a recession or that isn’t prepared for expansion. However, low interest rates and the much slower recovery we have had up until the last nine months or so have bought struggling businesses in our area time to sort out their problems.”

Mr Wood said: “It is interesting to see, however, that business distress has been falling much more slowly over the past six months than it had done previously. It may be that distress levels are falling back to ‘normal’ levels or that the recent pick-up in the economy is beginning to have an effect.”

R3’s latest survey also found that indicators of business growth in Yorkshire and the North East remain close to the record highs hit in the last survey in autumn 2013. Some 66% of businesses are showing at least one sign of growth, slightly up from 63% in October, 2013, and a huge rise from just 29% in March, 2012.

Signs of business growth in the region include investing in new equipment (40%), increased sales volumes (40%), increased profits (42%), business expansion (38%) and growing market share (27%).

Mr Wood said: “It’s very encouraging that business growth is keeping pace with the record figures we saw in the autumn. The repeat performance of the last survey’s strong figures gives weight to the idea that the economic upturn in the last six months was more than just a blip.

“Growth is still slightly uneven, with some regions, such as our own, much more positive than others and larger businesses do have more to celebrate than their smaller counterparts.”

However, the burden of regulation continues to concern businesses.

Only 11% of British businesses and 15% of Yorkshire and North East businesses feel that the burden of business regulation has fallen since the 2010 general election, despite government promises to cut red tape, according to R3’s survey.

In contrast, in the region, 34% of businesses feel that their regulatory burden has increased against 39% nationally while 49% feel that it has stayed the same compared with 47% across the UK.

Mr Wood said: “The Government’s record on deregulation has been decidedly mixed so far. Although the sentiment behind ideas like the ‘one-in, two-out’ rule is laudable, it is not clear that the regulations being removed are being much noticed by businesses.

“Speaking from the insolvency profession’s perspective, we have seen ‘deregulatory’ ideas proposed by the government that would actually add to the regulatory burden of the UK’s insolvency practitioners. Business and government aren’t necessarily seeing eye-to-eye on deregulation.”

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